After being in the renewable energy space for the better part of a decade, our team has seen plenty of profitable solar agreements met between landowners and developers. With that said, these agreements take time and diligence in order to be properly executed. One of the main concerns landowners have when entering a solar lease is the time investment it takes to get a project off the ground. What is involved in the due diligence period? What are the developers doing before, during, and after the panels are installed?
We’re pulling back the curtain and detailing the entirety of the solar development process and what developers do to ensure a successful project. Here’s what you, as a landowner, can expect.
Finding a Developer
At Scout Land Consultants, once we determine that a landowner is interested and the land is viable for a project, we create a marketing package and look for a suitable developer. This can take up to two-three weeks.
Once we find a developer interested in the property, the developer has the exclusive right to the development; we do not offer the opportunity to multiple developers. The developer will then send a Letter of Intent (LOI), a document that sets out the terms of the agreement between you and the developer. The terms will include the payments during the option period, the lease payments once construction begins, and the lease length (usually 20 – 25 years) with options for extensions and other terms.
Negotiation of the terms between the landowner and developer is typically complete within a week or so. The lease document must be signed by both parties in order for the developer to apply for permitting and start negotiations with the local utility.
The option period and diligence period can take between two-five years. You receive payments during this time as compensation for holding the option on the property. You can continue to use the property for any purpose and own cash crops. Although, no new structures can be built.
The diligence period overlaps with the option period. The developer is obtaining permitting, negotiating with the utility or power off-taker for the sale of power, and ensuring the land has everything needed for a successful solar project. They’ll be performing environmental impact, wetlands, and endangered species studies. They’ll also obtain financing for the project.
The developer files an Interconnection Application with the local utility – this is the agreement that shows the developer how much interconnection will cost them if they build the project, and ultimately allows them to fully model the project’s feasibility. The approval process can take up to two years.
Concurrently, the developer is negotiating a Power Purchase Agreement (PPA) with either the utility or another buyer of the power who would be buying the clean energy through Renewable Energy Credits (RECs). For community solar projects (or “DG” projects), the ultimate buyers of the power may look a little different than just a single entity, but it is also during this time that the developer fully models out revenue associated with the project based on the program it’s working within.
When the Power Purchase Agreement is signed, permitting has been approved, and all the requirements are met, the developer will receive the Notice to Proceed (NTP). This is the document confirming the project is ready to begin construction. When the developer takes over the property and pays rent, you’ll receive the lease payments annually or bi-annually during construction and the life of the project.
The life of a solar development is 25 – 40 years. The utility and the developer will have options for four to five-year extensions after the first term of the contract is over. The solar panels’ useful lifespan is 40 years.
After the agreement ends or the panels have reached the end of their useful life, the project will be decommissioned. Dismantling the solar array is relatively quick; there is almost no underground infrastructure, just poles and panels to pull up and dispose of.
There is no danger of toxicity after the project is dismantled, and you can take back and use the land for any purpose.
Solar development requires time and investment. Which is why pairing with the right developer is so important. Scout Land Consultants helps inform landowners of the potential for their property and connects them with developers who can maximize its value. Acting as mediator between developers and landowners, we work to integrate solar development, benefiting not only those directly involved but also the environment and communities served.
If you’re a landowner and wondering if a solar lease would be the right fit for your property, contact us today for a complimentary site evaluation.